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| 1. |
What are the forms in which business can be conducted by a foreign company in India?
Foreign companies can make investments or operate their business in a number of ways as given below:- |
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- Liaison/representative office
- Project office
- Branch office
- Wholly owned subsidiary
- Joint venture company
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| 2. |
Is foreign company treated as domestic company?
Yes, a foreign company incorporated under the Companies Act is treated at par with any domestic Indian
company within the scope of approval and subject to all Indian laws.
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| 3. |
How does a foreign company invest in India?
Either through:-
a. Automatic Approval or
b. Through the Foreign Investment Promotion Board (FIPB)
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| 4. |
What is the FIPB?
FIPB is a competent body to consider and recommend Foreign Direct Investment (FDI), which do not come under the automatic route.
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What are the factors considered by the FIPB while examining proposals?
To impart greater transparency to the approval process, guidelines have been issued which govern the consideration of FDI proposals by the FIPB.
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| 6. |
Is a 100% foreign owned subsidiary allowed?
Whether FIPB approval is required?
Yes, except in sectors that attract equity cap. The criteria for allowing such investments have been detailed in the guidelines. FIPB approval is required if the activity does not fall on the automatic route.
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How is FDI permitted in the Small Scale Sector?
Equity participation in the Small Scale Sector up to 24% by any other Industrial undertaking is allowed. For equity participation in excess of this or if a non-SSI unit whishes to manufacture a reserved item, it would be required to obtain industrial license and undertake a minimum export obligation of 50% of production.
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Can profits, dividends, royalty, know how payments be repatriated from India?
All profits, dividends, royalty, know-how payments that have been approved by the Government/RBI can be repatriated. Some sectors like NRI Investment in real estates may attract a lock-in period.
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Is FIPB approval required for the swap of shares?
Yes, FIPB approval is required.
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| 10. |
Whether issue of preference shares can be made on the automatic route?
Yes, subject to the activity concerned falling under the automatic route.
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Is it possible that a foreign company provide a non interest bearing or interest bearing loan to an Indian company?
Yes, subject to conformity with the ECB Guidelines of Ministry of Finance .
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Whether FIPB approval is required for consultancy services, research and development, software development etc.?
The above activities fall under automatic route and therefore, do not require FIPB approval.
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| 13. |
How are foreign technology agreements approved?
Approval is granted by two routes:-
a. Automatic approval by RBI:-
i) Available for any proposal with lumpsum payment not exceeding US$ 2 million, and royalty of upto 5% on domestic sales and 8% on exports. This is applicable to technical collaborations with technology transfer. There is no limit on duration of royalty payment by a WOS to its offshore parents.
ii) Payment of royalty up to 2% of exports and 1% for domestic sales on use of trade marks and brand name of the foreign collaborator without technology transfer.
b. Government approval in all other cases.
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Is it possible to use foreign brand names / trade marks in India and is lump sum fee permissible under royalty payment for use of brand name and trademarks?
Yes, it is possible to use foreign brand names/trade marks in India. However, lump sum fee is not permissible, only running royalty payment is permissible as per prescribed rate.
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Where to take the information?
Guidance to Investors:-
Consequent on transfer of the Foreign Investment Promotion Board (FIPB) to the Department of Economic Affairs (DEA), the arrangements with regard to matters relating to FDI policy, processing of applications submitted for NRI / OCB investments, 100% EOU and PAB, IL, FDI promotion and facilitation would be as under:-
i) The Department of Industrial Policy & Promotion (D/o IPP) continues to be responsible for "Direct Foreign and Non Resident Indian investment in industrial and service projects". All matters relating to FDI policy and its promotion and facilitation as also promotion and facilitation of investment by Non-Resident Indians, (NRIs) and Overseas Corporate Bodies (OCBs) are handled by the D/o IPP. The Foreign Investment Promotion Council (FIPC), Investment Promotion Cell and Foreign Investment Implementation Authority (FIIA), in the D/o IPP, continues to look after the investment promotion and facilitation work.
Correspondence in this regard may be addressed to Secretariat for Industrial Assistance (SIA), D/o IPP.
FDI cases requiring FIPB Approval:-
ii) FIPB proposals will be considered by the reconstituted FIPB in Department of Economic Affairs.
iii) The FIPB Secretariat now receives and processes FIPB applications and places them before FIPB for consideration. The Secretariat would communicate to applicants decision of the Government on their proposals and carry out the activities relating to post-approval amendments. Further, information on the status of pending applications, cases listed for the meeting of FIPB, can be obtained at DEA Website (http://finmin.nic.in)
NRI/OCB Investments & 100% EOU cases.
(iv) Applications for NRI/OCB investments and 100% EOU cases for consideration of FIPB will continue to be addressed to the EAU in the SIA, D/o IPP, Udyog Bhawan, New Delhi. SIA would place these cases before the FIPB.
Technology Collaboration Cases:-
(v) Applications for consideration by the Project Approval Board (PAB) for approval of technology transfer, payment of royalty, etc. and those for grant of industrial license will continue to be received and registered by the EAU in the SIA, D/o IPP, Udyog Bhawan, New Delhi.
Industrial Entrepreneurial Memorandum (IEM):-
(vi) The Industrial Entrepreneurial Memorandum (IEM) will continue to be filed with the EAU in the SIA, D/o IPP, Udyog Bhawan, New Delhi.
Status of applications:-
(vii) Information on the status of applications for NRI/OCB Investment and 100% EOU cases would be available at the website of DIPP. The status of posting of letters relating to NRI/OCB investments and 100% EOU cases considered in FIPB will be displayed on website of DIPP.
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